Rae: New game plan
New Delhi, Sept. 12: The government is likely to cut petrol prices next week, following a decline in global crude rates and the appreciation of the rupee.
There are indications that petrol prices will be reduced by Rs 1-1.50 per litre next week.
However, diesel and domestic LPG cylinders may become costlier.
Diesel prices could be hiked by Rs 3-5 per litre, LPG cylinder by Rs 50 and kerosene by Rs 2 per litre.
Oil secretary Vivek Rae said the issue of a one-time hike in diesel and cooking fuel rates “is a political and economic challenge” from which “we cannot run away. Some burden has to be borne by consuming population. That is the challenge the government faces. It is a political and economic challenge”.
A recent recovery in the rupee, which had hit a record low of 68.85 against the dollar, and a fall in global crude prices, with the attack on Syria appearing less imminent, have eased the pressure on government finances, he said.
Rae said the subsidy burden had reached unsustainable levels and could not be financed by the government budget and oil companies.
“Finance minister (P. Chidambaram) himself has said that the decision has to be considered very carefully. So, I guess all aspects will be taken into consideration before deciding what to do next. There are many options available,” he said.
A Rs 5 rise in diesel prices will reduce the under-recoveries of oil marketing PSUs by Rs 29,390 crore; a Rs 50 rise in LPG rates will bring down under-recoveries by 2,604 crore, while an increase in kerosene prices by Rs 2 per litre will reduce under-recoveries by Rs 1,014 crore.
Rae said the oil ministry had sought legal opinion on levying an additional penalty of $781 million on Reliance Industries Ltd for failing to meet production targets of gas from its Krishna-Godavari fields in 2012-13.
The three hikes together will reduce the government’s subsidy outgo to Rs 50,928 crore, officials said.